N.C. House, Senate still working on tax reform bill

Monday

After weeks of deliberation on a tax reform bill — House Bill 998 — the N.C. House and Senate are still deliberating on a compromise.

“We’re trying to negotiate, but one chamber has 120 members and the other has 50,” N.C. Rep. John Bell, R-Wayne, said. “As a result, you’ve got so many different opinions being tossed around. We’ve modified our original plan and we’re trying to figure out what’s best for North Carolina. Some plans might look like a good idea, but when you run the numbers on revenue projection, opinions change.”

As a result, several factors are still being debated. N.C. Sen. Louis Pate, R-Wayne, said compromises can be made, but there are contrasts between the House and Senate bills.

“There are some general differences of opinion on it,” Pate said. “We’re all for tax reform, but some think certain areas should be emphasized among others. Some are more focused on personal income while others want to see corporate taxes lowered. There are other possibilities, with sales, state and franchise taxes.”

The personal income tax in the House version would be lowered to 5.9 percent next year for all taxpayers — some dealing with 7.75 percent rates — and stay there, while the Senate plan would drop the tax down to 5.4 percent in 2014 and 5.25 percent in 2015.

The corporate tax would be lowered from 6.9 percent next year and will continue to drop gradually to 5.4 percent in 2018 in the House’s plan. The Senate’s plan is more extreme, reducing the rates to 6 percent and dropping it down until 2017, when the tax would be eliminated.

Not every member of the Senate agrees with the tax proposals. N.C. Sen. Floyd McKissick Jr., D-Durham, said there were senators who didn’t approve the bill, but the majority spoke.

“The Senate’s approach is to downsize government in general as part of the budgeting process and reduce corporate tax,” McKissick said. “Whether it’s a small mom-and-pop company or a major corporation, the same flat tax of $5,000 per year will be sent and low-wealth working class people will pay more. It’s not a part of my proposal. I feel like it’s regressive, has a negative impact on the working class, makes further devastating cuts to public education and lacks compassion for those who work the hardest and contribute the most in our society.”

The Senate also wants to repeal the local sales tax on groceries, but will allow county governments to re-impose taxes if revenue is needed. Lenoir County Commissioner J. Mac Daughety says he hopes it doesn’t happen, but has planned for any change.

“There has to be a lot of negotiations that have to be on it,” Daughety said. “There seems to be more sentiment in the House to protect revenue bases, but if the legislature decides to pull the tax out, the only way I could be in agreement is if we raise sales taxes over an increase in property tax. Sales tax is a true user tax; if you don’t want to pay it, don’t use the service. I’m not in favor of raising any taxes, but the most equitable way is a sales tax.”

Kinston resident Steven Byrd said he was open to sales taxes being eliminated if there weren’t ulterior motives by the government.

“If the government tells us exactly where the money is going, I would support it,” Byrd said. “Still, I have no problem with the way things are now.”

Perhaps the biggest reason why a compromise hasn’t been met is because of the drastic discrepancies between the amounts of tax cuts. While the House plan would decrease state revenue by about $1 billion over the next four years, the Senate plan would quadruple that amount.

Overall, Lenoir County could suffer significant losses in revenue. In Kinston alone, the city is projected to lose about $393,000 in next year’s budget and more than $2.96 million through 2019.

“We don’t want anything in this legislature to affect county revenue,” Lenoir County Commissioner Chairman Reuben Davis said. “If it’s going to adversely affect taxpayers of Lenoir County, I don’t want this taking place. We’re never safe when the legislature is in session.”

Although there are several issues that are still being worked on, Pate believes an agreement will come in the near future.

“I would give it another couple of weeks,” Pate said. “The House isn’t planning to meet this week, which could set us back, but should be back with an idea of compromise.”

Junious Smith III can be reached at 252-559-1077 and Junious.Smith@Kinston.com. Follow him on Twitter at @JuniousSmithIII.

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